BBVA Or HSBC: Which Is The Better Value Stock Right Now?
Zacks Investment Research | Jan 15, 2020 11:40PM ET
Investors looking for stocks in the Banks - Foreign sector might want to consider either Banco Bilbao (BBVA (MC:BBVA)) or HSBC (HSBC). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Banco Bilbao is sporting a Zacks Rank of #2 (Buy), while HSBC has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BBVA is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
BBVA currently has a forward P/E ratio of 8.11, while HSBC has a forward P/E of 10.64. We also note that BBVA has a PEG ratio of 3.48. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. HSBC currently has a PEG ratio of 7.44.
Another notable valuation metric for BBVA is its P/B ratio of 0.55. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, HSBC has a P/B of 0.79.
Based on these metrics and many more, BBVA holds a Value grade of B, while HSBC has a Value grade of F.
BBVA sticks out from HSBC in both our Zacks Rank and Style Scores models, so value investors will likely feel that BBVA is the better option right now.
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